Net profit to mother is forecast to increase by 33.1-38.8% year-on-year in 2023

The company announced its 2023 performance forecast: The company expects to achieve operating income of 1.45 billion yuan to 1.63 billion yuan in 2023, with a median value of 1.50 billion yuan (year-on-year increase of 35.0%); expected to achieve net profit of 161 million yuan to 168 million yuan, with a median forecast of 165 million yuan (year-on-year increase of 37.1%); and expected to achieve net profit after deduction of 150 million yuan to 157 million yuan, a median increase of 155 million yuan (year-on-year increase of 40.3%).

Looking at a single quarter: 4Q23 forecast median net profit of 0.28 million yuan, -18.5% YoY; median net profit after deduction was 0.2 billion yuan, -37.6% YoY

Key points of interest

High-end new energy equipment is progressing smoothly, and export projects continue to receive attention. The company's high-end new energy equipment mainly focuses on clean utilization of nuclear power, photovoltaics, hydrogen energy, and traditional energy. 1) In the field of nuclear power, the company is expected to carry out in-depth product research and development work in the field of new fuel carriers. In addition, the company is also carrying out in-depth exchanges with CNNC in the field of spent fuel. The company expects the products to move from continuous prototyping to small machines, medium and large machines. 2) In terms of hydrogen fuel transportation, the 90Mpa hydrogen storage tank has been verified and approved by customers. We expect that in the future, the company will rely on the professional ability to understand equipment processing and process performance, and hydrogen energy revenue is expected to bring new growth opportunities to the company. 3) In the field of photovoltaics, according to company exchanges, the company will have the opportunity to participate in the construction of overseas photovoltaic park projects. We expect that in 2024, the company will focus on overseas markets and continuously increase the share of product sales in overseas markets, thereby further expanding the company's revenue scale.

The fund-raising project will be put into operation at the end of January, and production capacity is expected to continue to increase. According to the public exchange of the company's 2023 annual results forecast, by the end of 2023, the total number of land used for production capacity was 78 acres, and 16 acres will be added by the end of January 2024. The company expects 20% of the new production capacity to be built in the future, in addition to factories to be built. The company's capacity utilization has been at a high level in recent years. The current production capacity has continued to increase from 18,000 tons/year in 2020 to 33,000 tons/year now. We believe that considering the versatility of the company's overall products, the expansion of production will help the company to streamline operations and production of some of its equipment in the future, and production capacity is expected to increase further. We expect the company's production capacity growth rate in the petroleum refining and chemical industry to slow down in 2024, and production capacity investment will focus on fields such as high-end new energy equipment and natural gas chemicals.

Profit forecasting and valuation

Due to the overall weakening of the downstream operating rate in the fourth quarter, we slightly lowered our 2023 net profit forecast by 5.4% to 166 million yuan (+37.1% YoY); considering the weakening of the downstream sector in 2024, we lowered the company's 2024 revenue by 8.5% to 1.85 billion yuan (+27.7% YoY), and lowered net profit 15.2% to 210 million yuan (+24.7% YoY), and introduced the 2025 revenue/profit forecast for the first time. The target price was lowered by 15.1% to 14.38 yuan. The current price is 15/12x for the 24/25 P/E, and the target price is 19/15x for the 24/25 P/E, which corresponds to an increase of 24.7%.

risks

The scale of fixed asset investment in the downstream industry has shrunk, and progress in nuclear power projects has fallen short of expectations.